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This article is part of a continuing series about Nebraska Senator Jeremy Nordquist (7). There are several important reasons why we are allocating so much time to this topic. We ask that regular readers of the GiN site visit daily at least through this weekend and share this information with whomever they believe would be interested.

Note that this not about an election issue – Nordquist is not up for re-election until 2012. Issues relevant to Nebraska’s budget troubles and the implementation of the health care law are involved. In the course of conducting research on these matters, we have realized that Senator Nordquist’s agenda, activities, and recent conduct require the scrutiny of Nebraskans.

The problem with performance by government, compared to the private sector, is that there are often no consequences for failure. In a free market economy, if customers don’t like a product, service, or the operating style of a company, there is no profit and the business goes belly up.  Consequently, anyone whose livelihood is tied to that company, from the owner or CEO to the lowliest employee, have a personal stake in doing whatever must be done to make the company succeed.  Employees at all levels must perform well in order to be retained.

In government, being a warm body seems to be all that is required. Specific performance is not measured; just sit there for a while and that is “experience”. It doesn’t hurt, as long as no one is really looking carefully, to excel at spinning mere presence into sounding like excellent performance.

Our most recent article “Nebraska: We Have Our Own Community Organizer” laid out the background of Jeremy Nordquist, Nebraska’s District 7 representative in the Legislature. Our analysis of Nordquist’s experience is that he has little to no experience in “the real world” and his current pursuits all point in one direction.  From the information available, Nordquist seems poised to permanently station himself in the sector of the economy that relies almost solely on taxpayers for funding.

The first problem with this concept is best stated in the form of a question: In a civil society with a limited government should such a career be considered a worthwhile pursuit? I would argue that it is precisely because performance in government has no measure resembling that which exists in the private economy, the fewer people who work directly for government and depend upon it for their livelihood, the better.

Prior to his election to the Nebraska Unicameral, Jeremy Nordquist was the Research Analyst for the Legislature’s Retirement Systems Committee. His biography notes the following regarding his tenure as analyst:

“Jeremy collaborated with committee members of both political parties and interested groups to ensure the financial sustainability of public pensions for teachers, judges, state patrol officers, and other state employees.” (emphasis added)

Emphasis was added because Nebraska’s Retirement System pensions fund is in trouble. In 2009, it was discovered that $253 million was needed to begin straightening out its problems. At that time, it was known that more would be needed. Brief mention of this fact was made during a budget hearing in June of this year, and an August Lincoln Journal Star story reports that the state employees’ pension fund comprises 15% of the current projected budget shortfall.

It is becoming clearer and clearer that defined benefit plans as a general concept are simply not sustainable. Defined benefit plans, which very many government employees, including Nebraska’s, have for their retirement, are best understood when compared to those of private sector workers. Most Americans have a retirement plan with a 401k, which is tied to the investment markets, and, therefore, the amount available at retirement varies based on their investment decisions and performance of the overall economy over time.  Large drops in the stock market in 2008 and its volatility since have meant that many Americans’ 401k accounts were cut by significant percentages. The amount available for retirement was significantly reduced.

In contrast, defined benefit plan recipients receive fixed amounts regardless of the performance of the economy in general or investment markets specifically.  These plans are similar to 401ks in the sense that the monies are invested.  Defined benefit plans are managed by the governments that provide them. In the case of the Nebraska Retirement System, that means the State of Nebraska generally and, in particular, the Nebraska Retirement Systems Committee, which employed Senator Nordquist as its research analyst.  The huge difference here is simply that, when the defined benefits plans lose large amounts of money, the amount that will be paid to participants at retirement is not reduced; it is not dependent on the performance.

It’s not hard to see why many states are now in a lot of financial trouble for this reason alone.

To make something sustainable is to make it endure, make it last.  The entire construction of the pensions system is not sustainable, and it is proven by the fact that a downturn in the market ensures that taxpayers must fill in the shortfalls.

The trouble with all of these government programs is that they are constructed and managed by few people with any real appreciation of or experience with a free market and how it works. A failure to understand this means the people making the decisions cannot see over the edge of the horizon. Ample evidence of a stock market crash based on a housing bubble existed for those who are supposed to be particularly skilled in the areas of analyzing financial information. While most convinced themselves the euphoria could last forever, some were honest.

No one in Nebraska government apparently saw the bursting of the bubble coming, and the Retirement System was hit hard. Taxpayers will fill in the shortfall. I’m having trouble calculating how many times over we will all be paying state employees as a result; we pay for their salaries, current benefits, and for their retirement. Now we will have to pay to ensure they receive a guaranteed benefit amount during their retirement – while the majority of us work to restore the balances in our own retirement accounts.

The question is:  As Research Analyst for the Retirement Systems Committee, did Jeremy Nordquist help make it “sustainable,” as he so proudly claims? It does not appear that anyone involved ensured the funds’ stability. But, as noted above, there is no real analysis of government or government workers’ performance, and there is no real accountability — between elections.

I wish I could say it gives me confidence to know that Senator Nordquist moved from being the analyst for the Retirement Systems Committee to his current position as Vice-Chairman of that Committee once he was elected to represent District 7 in the Legislature.

Let us all pray that he learns the definition of sustainable real soon, along with the other members of the Committee.